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BWA Continues To Play Vital Part In Emission Improvement. Note On Q2 2013

Jul. 25, 2013 11:01 AM ETBWA
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Seeking Alpha Analyst Since 2012

Mr. Wagner commenced employment with Jay A. Fishman, Ltd. in October 2011 as an Investment Analyst. Mr. Wagner participated in our summer intern program in 2008 and 2009. Prior to joining the firm, Mr. Wagner was an analyst at Northern Trust Company in Chicago. Mr. Wagner received a Bachelor of Science in Finance and Economics, graduating with honors, from Spring Hill College in 2010.

A miss on the topline with a solid beat on the bottom. They saw record operating margin and expect it to continue at an elevated level according to their FY'13 projections. They also instituted a small dividend of $0.25/share (a 1% yield). Currently flat on the day following the report.

Q2 2013

REV $1.89b vs $1.92b(e); +2%yoy

EPS $1.50 vs $1.40(e); +10%yoy

  1. Revenue Breakdown
  2. Engine Group sales were $1.288b; +1%yoy; excluding favorable fx in 2012 sales were up 4%yoy
    1. Driven by higher sales of turbos, exhaust gas recirculation coolers and engine timing systems in China and turbos in Brazil
  3. Drivetrain Group sales were $614m; +3%yoy
    1. Driven by sales of all-wheel drive systems in North America and all-wheel drive systems and transmission components in Korea
  4. Operating income margin of 12.9% which is a quarterly record; +240bps yoy
  5. Declared a dividend of $0.25/share; first time declaring a dividend
  6. Repurchased $100m of shares in the quarter; no average price given

"Outstanding performance by our operations drove our strong second quarter results," said James Verrier, President and CEO of BorgWarner. "The focus on fuel economy and improved emissions continued to drive growth for BorgWarner around the world. Excluding the favorable impact of foreign currencies and 2012 dispositions, our net sales were up approximately 3% in the second quarter compared with second quarter 2012. Global light vehicle production was up 3% and European light vehicle production was up 1% in the same period. Operational efficiency and cost controls enabled us to post a record operating margin of 12.9% in the quarter."

FY'13 Guidance

REV ~$7.47b; +3-5%yoy which was previously guided at +2-6%yoy

EPS $5.40-5.55 vs $5.36(e); +32%yoy

  1. Operating income margin is expected to be approx. 12%; ~+150bps yoy

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